Real Estate Investing and Financing

Types of Investments and Financing for Real Estate

  • 1031 Tax Exchange is an exchange in which capital gains tax deferral is possible to real estate owners who sell their investment, rental, business or vacation real estate, and reinvest the net proceeds in other real estate. Real Estate held for these purposes are called 1031 properties. Sometimes they are called like kind sales.

  • Foreclosure translates into images of bargain-basement buys. The first thing you should do is block these visions of paying 10 cents on the dollar. In these times of a very strong real estate market, such a deal is nearly impossible. HOWEVER. To expect 20 - 50% off the market value of a property is not unrealistic.

  • Pre Forclosure is a deal between the homeowner, seller, and in sometimes, the lender. This can be a very successful way for both parties to make a quick transaction. First, start by seeking for loans that are in default. With this option, you will be able to inspect the home and determine what the seller's needs are. Also with a pre forclosure, you will need to find out the actual value of the home, what it will cost for repairs, and how much profit you could make on the resale.

  • Real Estate Foreclosure - There are two types of Real Estate foreclosures: judicial and non-judicial. The difference is that judicial real estate foreclosure requires a lawsuit filed in court, while a non-judicial real estate foreclosure circumvents this process. Although some states allow both procedures, there is usually a dominant foreclosure type in each state

  • Mortgage Buyers - Mortgage Buyers - The potential reasons to sell your Privately Held Mortgage are numerous. It could be you are planning a new investment strategy? Or maybe you want to buy more real estate or start your own business. Perhaps you need to fund a medical emergency or pay for your child's education. Or maybe you and your husband or wife just want to take a needed vacation.

  • Real Estate Investing - There are numerous exciting opportunities and businesses that can be worked from home. We did some extensive research on Real Estate Investments. What we found was Real Estate Investing was over-looked by many because of the upfront cash that many people think is necessary to invest.

  • LLCs and Real Estate - It is much easier and typically less costly to make the choice of entity decision at the beginning of the investment cycle. More often than not it can be as simple as specifying and/or negotiating the deal based on a specific entity taking title.

  • Angel Investors are individuals or groups who invest in businesses looking for a higher return than they would see from more traditional investments. In return for their investment they often are highly involved in the business. Usually they are the bridge from the self funded stage of the business to the point that the business needs the level of funding that a venture capitalist would offer. Funding estimates vary.

  • Hybrid Mortgages - In the past, the easy solution to rising interest rates would be to switch from fixed rate financing to an adjustable rate mortgage (ARM). But alot of buyers often feel uncomfortable about signing up for a mortgage with monthly payments that can rise over time -- particularly in a rising interest rate environment. A more enticing alternative that provides interest rate security and lower monthly payments is the hybrid mortgage.

  • Joint Ventures is a General Partnership typically formed to undertake a particular business transaction or project rather than one intended to continue indefinitely. Most often, joint ventures are used in real estate matters where 2 or more persons undertake to develop a specific piece of real property.

  • Venture Capital provides businesses a financial cushion. However, equity providers have the last call against the company‚Äôs assets. In view of this lower priority and the usual lack of a current pay requirement, equity providers require a higher rate of return or Return on Investment (ROI) than lenders receive.

  • Tax Lien Certificates is when a property owner fails to pay his/her real estate property taxes. Unpaid taxes become a lien on the property. Basically, this means that the delinquent tax bill is recorded in the local governments property records, and until the taxes are paid, the tax lien remains. This creates a Tax Lien Certificate. Meanwhile, a statute mandated interest rate penalty from 15% up to 50% per year is mounting up. If the real estate property taxes remain delinquent for too long (five years or less) the property owner will risk losing the real estate.

Mortgage Types

For most people, purchasing a home is nerve racking enough. The most difficult part is understanding what finance options are out there and which one best suits your needs.

Adjustable Rate Mortgages

With a conventional fixed-rate mortgage, the interest rate stays the same during the life of the loan. But with an Adjustable Rate Mortgage, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly. Lenders generally charge lower initial interest rates for Adjustable Rate Mortgages than for fixed-rate mortgages.

Bad Credit Mortgages

Just because your credit isn't perfect doesn't mean you should miss out on the opportunities available to everyone else. You can get relief from high mortgage and interest payments with bad credit mortgages, but you can also get much more.

Bi Weekly Mortgages

The bi-weekly mortgage shortens the loan term from 30 years to 18 to 19 years by requiring a payment for half the monthly amount every two weeks. While you pay about 8 percent more a year towards the loan's principal than you would with the 30-year, one-payment-per-month loan, you pay substantially less interest over the life of the loan. Keep in mind, however, that with shorter-term loans, you trade lower total costs for smaller mortgage interest deductions on your income tax.

Home Mortgage Loan

For most people, purchasing a home is nerve racking enough. The most difficult part is understanding what finance options are out there and which one best suits your needs. Remember, lending is a business and lenders are in the business of making money through loaning money and getting paid interest on this.

Negative Interest Mortgage Loan

The real purpose of negative amortization has been to reduce the mortgage payment at the beginning of the loan contract. It has been used for this purpose on both fixed-rate mortgages (FRMs) and adjustable rate mortgages (ARMs). A second purpose, applicable only to ARMs, has been to reduce the potential for payment shock, a very large increase in the mortgage payment associated with an increase in the Adjustable Rate Mortgage (ARM) interest rate.

Private Mortgage Insurance - PMI

In the event that you do not have a 20 percent down payment for your newly purchased home, lenders will allow a smaller down payment, as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on you loan's structure.

Refinance Home Mortgage

Refinancing your home mortgage is a way of replacing high-interest debt with a home loan that has a lower interest rate. But it can also be done in order to switch from a fixed rate mortgage to variable rate mortgage, or vice versa, or to eliminate a balloon loan payment. A cash-out refinancing is one that involves you paying off your home loan and borrowing an additional amount. The entire loan amount is secured by a mortgage lien on your home.

Reverse Mortgages

A Reverse Mortgage is a special type of home loan that lets a homeowner convert the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to the homeowner: in a lump sum, in a stream of payments, or as a supplement to Social Security or other retirement funds. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrowers no longer use the home as their principal residence.

Second Mortgages

There are many clear advantages to this type of creative financing. The most frequent use is a second mortgage that reduces the Loan to Value of the first loan in order to allow you to more easily qualify for the loan. An good example would be where the primary lender or first mortgage holder will only lend 70% LTV and you only have a 20% down payment. A second mortgage can be used to make up the difference.

Wrap Around Mortgages

Wrap-Around Mortgaging can be used for your Small Business Startup. Wrap Around Mortgages - usually means that there is an assumable loan on the property, say $30,000 at 6 percent, and that a seller or other party takes back a loan for the buyer, say, $100,000 at 8 percent. The $100,000 consists of the continued loan obligation to repay the old $30,000 debt and $70,000 in new debt. The seller or lender actually receives 2 percent interest on the first $30,000 and 8 percent on the remaining $70,000. Since the seller or lender did not provide the first $30,000, the rate of return for the $70,000 they did provide is substantially higher than 8 percent.

Alternative Loans and Mortgages

  • Fannie Mae Mortgages

    Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. They do not lend money directly to home buyers. Instead, they work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership.

  • FHA Loans Mortgages

    A mortgage on which the lender is insured against loss by the Federal Housing Administration, with the borrower paying the mortgage insurance premium. The major advantage of an FHA mortgage is that the required down payment is very low, but the maximum loan amount is also low.

  • Freddie Mac

    Freddie Mac is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multifamily investors.

  • Ginnie Mae

    Ginnie Mae is a slang term universally used to denote the Federally owned corporate entity that purchases, on the secondary market, residential real estate mortgages that were originated by local lenders. Ginnie Mae, or the association, then issues federally insured securities backed by the mortgages. The real abbreviation is GNMA, standing for the Government National Mortgage Association.

  • VA Mortgages

    A Veterans Administration (VA) Mortgage is a Mortgage with no down payment requirement, available only to ex-servicemen and women, on which the lender is insured against loss by the Veterans Administration.

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